w History Bookmarks People WileyPLUs e https://edugen wileyplus Would you lke to
ID: 2543494 • Letter: W
Question
w History Bookmarks People WileyPLUs e https://edugen wileyplus Would you lke to translate it Nope Translate Never translate Arabic Options × Return to t Intermediate Accounting, 16e Brief Exercise 6-15 Shendan Inc. issues $2.11o,100 of 11% bonds due in 13 risk is 12%. years weh interest pnable at year-nd. The amen market rate r-terest fet bra d soir ! what amount will Sheridan receive when it issues the bonds? ( decimal places, e.g. 458,581,) r Round factor values to 5 decimal places, eg. 1.25124 and final answers to Amount received by Sheridan when bonds were issued Question Attempts:0 a, 3 used SAvtro. LATER MacBook Air 41Explanation / Answer
Solution: Amount received by Sheridan when bonds were issued $ 1,974,548 Working Notes: $2,110,100 is of issues of 11% bond , means, total par value of bond is $2,110,100, and amount which will be received is the bond price. Bond Price = Periodic Coupon Payments x Cumulative PVF @ periodic YTM (for t= to t=n) + PVF for t=n @ periodic YTM x Face value of Bond Coupon Rate = 11% Annual coupon = Face value of bond x Coupon Rate = 2,110,100 x 11% = $232,111 Market rate of interest (YTM) = 12% p.a (annual) n= no.of coupon = No. Of years x no. Of coupon in a year = 13 x 1 = 13 Bond Price = Periodic Coupon Payments x Cumulative PVF @ periodic YTM (for t= to t=n) + PVF for t=n @ periodic YTM x Face value of Bond = $ 232,111 x Cumulative PVF @ 12% for 1 to 13th + PVF @ 12% for 13th period x 2,110,100 = 232,111 x 6.42355 + 2,110,100 x 0.22917 =$1974548.23105 =$1,974,548 Cumulative PVF @ 12% for 1 to 13th is calculated = (1 - (1/(1 + 0.12)^13) ) /0.12 = 6.42355 PVF @ 12% for 13th period is calculated by = 1/(1+i)^n = 1/(1.12)^13 =0.22917 Please feel free to ask if anything about above solution in comment section of the question.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.